European Retail Sales Remain Steady

Eurostat has just published the Retail Sales data for the Eurozone for the month of February. Year on year this number is 0.8% meeting consensus estimates and a revised prior reading both also 0.8%. The month on month figure came in at 0.4%, down on January’s revised 1.0% but easily beating the conservative estimate of -0.6%.

Important as these figures are, they are largely overshadowed today by the upcoming European Central Bank (ECB) meeting and policy announcement, this is particularly the case as the ECB is rumored to have already drafted the minutes of today’s meeting and so are unlikely to be basing any policy decisions on this morning’s Retail Sales data.

The Euro is in a wide holding pattern this morning ahead of the ECB announcement. Although more to the point it will be the subsequent press conference that will form the main risk event for the currency as realistically there are little expectations of a further rate cut. The ECB will however need to explain it’s approach to dealing with the further slippage in the inflation rate and it is likely that the overpriced Euro will receive some of the blame for the recent downward pressure on prices.

Over the past year the single currency has been consistently drifting higher, appreciating almost 8% against the US Dollar in this time. The ECB tends to remain removed from currency markets and as such does not publish an exchange rate policy regarding the Euro. Inflation however is a mandated target of the ECB and given the Euro’s bearing on this rate, which is worryingly low, the ECB will now need to adopt a firm view on the single currency.

The chairman of the ECB’s Governing Council, Mario Draghi, has recently been hinting that the Bank will be turning it’s attention to the exchange rate, what this means in reality will need to be seen but a recent poll of economists by Bloomberg suggested that $1.43 would be the upper limit that the ECB would allow. Today’s press conference is due to shed some light on this.

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